Realty World Alliance Real Estate Blog

Homeownership rate experiences biggest drop in 70 years!

Greg Wang — Fri, 14 Oct 2011 05:16:00 +0000

The U.S. homeownership rate experienced its biggest drop in 2010 in 70 years, dropping to 65.1%, down from 66.2% in 2000, according to data from the Census Bureau.
The decline came even as the nation added 15.8 million housing units, increasing the total housing inventory by 13.6%, the Census Bureau said Thursday.
Eleven states suffered declines of at least two percentage points in their homeownership rates, led by South Carolina, with a decrease of 2.88 percentage points.
Nevada, the state that experienced the biggest housing boom in the nation over the past decade, saw its homeownership rate fall by 2.09 percentage points. The state’s housing units grew by 41.9% from 2000 to 2010. Housing growth outpaced population growth — which was already the fastest in the nation — by almost 7 percentage points.
Nevada, also registered the biggest growth in vacancy rates. The state’s vacancy rate, a measure of the share of unoccupied units on the Census survey, rose by 5.1 percentage points in 2010 from 10 years earlier. It stood at 14.3% at the end of 2010.
That increase “was almost completely driven by the increase in Clark County,” said Ellen Wilson, a statistician in the Census Bureau’s Economic and Housing Statistics Division, on a conference call Thursday. Clark County, home to Las Vegas, saw a 6.4 percentage point increase in vacant units.
Nevada’s vacancy rate was followed by Florida, (up 4.2 percentage points); Michigan (up 4 percentage points); and Georgia (up 3.9 percentage points).
The 10 states with the highest housing unit growth rates were in the West and South. After Nevada, Arizona clocked the second-largest gain, as its housing inventory rose by 29.9%, followed by Utah, with a 27.5% gain, and Idaho, with a 26.5% increase.
California had the most total housing units in 2010, as it did in 2000, with an inventory of 13.68 million units. Texas was next, with 9.98 million units, followed by Florida, which gained enough housing units to surpass New York.
Source: Liz Enochs

A Wachovia Short Sale is the New Real Estate Heaven

Greg Wang — Fri, 26 Aug 2011 10:36:00 +0000

Wachovia Short Sales Are Far More Superior than Any Other Short Sales
As a Real Estate Broker in the trenches who hears and experiences a lot of short sales horror stories each and everyday, when we closed our first Wachovia short sale, we thought we all had died and gone to Real Estate Heaven. When the manager of the short sale department for Wachovia first came to my office to talk to me about Wachovia’s short sale program. It was hard for me to believe his pitch because it sounded way too good to be true.
The truth is Wachovia takes the pain out of short sales for everyone involved in the transaction. Wacovia is a portfolio lender, meaning it made its own loans and is responsible for deciding whether to approve a short sale. Other banks such as Bank of America, CitiMortgage, Chase or Wells Fargo generally have to submit the file to their investors for approval. Depending on the guidelines those investors follow, the process can be complex, lengthy and or produce ridiculous demands that cause short sales to be rejected. Not so with Wachovia!
How Banks Other than Wachovia Handle Short Sales
First, to truly appreciate a Wachovia short sale, it helps to look at the short sale process adopted by most major banks. Once you realize what hell those banks put a seller and buyer through, you’ll understand why Wachovia is special.
Here are some of the problems with other short sale banks:

The worst problem is it takes too long. Buyers get tired of waiting for short sale approval and cancel their purchase because banks can’t process their short sales fast enough. It can take a minimum of 6 weeks to 6 months or longer to get short sale approval.
Banks require a ton of paperwork from the sellers. They generally want their last 2 years of tax returns, W2s, payroll stubs, completed financial statement, bank statements, hardship letter, in addition to a slew of documentation from the listing agent.
Some banks demand seller contributions, even on California purchase-money loans. Purchase money loans in California are typically exempt from a deficiency judgment in the event of a foreclosure, but to grant a short sale, the banks may demand money from the seller.
Often, when there are two short sale loans, the two banks fight over how much the second bank will receive. Some second lenders try to push sellers to commit short sale mortgage fraud. It’s a nasty situation all the way around!
By the time the short sale finally closes, the sellers often feel broken down, beat up and battered. They wonder why they even tried to do the right thing by choosing a short sale over a foreclosure. And even after closing, sometimes the bank’s departments are so confused that the short sale department forgets to notify the foreclosure department that the transaction has closed, and the bank files foreclosure anyway.

How Wachovia Handles a Short Sale
With Wachovia, it’s like opening the door at the train station in Venice and discovering the Grand Canal is at your feet, looking just like a picture postcard. Like Dorothy in Wizard of Oz, leaving her black-and-white world and entering the colorful Land of Oz. It’s like eating chocolate for breakfast.
Before rendering an opinion on the short sale, Wachovia asks for basically 3 things:

The buyer’s and seller’s signed purchase offer.
The buyer’s preapproval letter and proof of funds.
The seller’s listing agreement.

A representative from Wachovia will either call or visit the seller at home to discuss the seller’s financial situation and appraise the home. If there are two short sale lenders, Wachovia knows how much the second lender is likely to accept and offers that sum to the lender. A HUD statement is then delivered to Wachovia by the Title Company, and a decision is rendered, generally within a few weeks.
In certain situations, Wachovia will offer the seller a cash bonus to assist with moving expenses. All short sale banks should approve short sales like Wachovia and when they do the entire Real Estate Community will all feel like they have all died and gone to Real Estate Heaven!

The True Cost of Waiting

Greg Wang — Mon, 18 Jul 2011 23:32:00 +0000

I Want a Bigger/Nicer Home but…
Over the past few weeks I have talked to many present and past Clients that are current homeowners that would like to move up to a larger or a nicer home, but are patiently waiting for the market to improve. A frequently heard complaint is that they can’t sell their home for what it is currently worth.

Buying up in a down market is actually advantageous because while you might get less for the home you’re selling, you’re also getting the larger home for less. For instance, if you had to sell a $400,000 home for a 10% discount, you might feel that you left $40,000 on the table. However, buying a $600,000 for the same 10% discount would put you $20,000 ahead on the sale and purchase. (The $ 60,000 you gain by buying at a 10% discount minus the $ 40,000 you lose by selling at a 10% discount equals a $ 20,000 profit.)
The other obvious matter is that when the mortgage rate increase while you’re waiting for the market to improve, it dramatically increases your cost of housing with higher payments. The cost of housing is affected by price and mortgage rates.
To accurately evaluate your current options, you need facts and assessment tools that will provide you the information to make an informed decision. Below is a example that simply illustrates how by just waiting to move up to a larger home while the mortgage rate increases how much more the house will cost while you wait for the market to improve.

Therefore, if you have contemplated on moving up to a larger home now is the perfect time to make that move before the interest rate increases and you end up paying more for the same house.

Why Investing in Rentals Could Be a Good Move Now?

Greg Wang — Fri, 24 Jun 2011 18:36:00 +0000

As home prices fall and rents rise, some investors are plunking their money into real estate, chasing the cash flow that comes along with becoming a landlord.
“For the first time in a long time, you can buy that home and can get a cash-on-cash return immediately,” said William King, director of valuation services for Veros Real Estate Solutions, a supplier of housing data to the country’s largest banks, as well as government organizations. “There are a lot of places in the country where an investor can buy a single-family home, rent it, and get a positive cash flow.”
In fact, investors bought 20% of all the homes sold in April, according to the National Association of Realtors. Some of them are buying with cash.
But even if they do finance part of the purchase, they’re able to turn around a profit much quicker than they would have been able to in the past, King said. And the return on rentals can be much better than returns on other investments these days, he added.
In the past, investors would subsidize their monthly payments on a property with the rent they were able to collect, and the big payoff was the price appreciation he or she would accumulate, he said. Now, investors can come in with a 25% or 30% down payment, finance the rest, and the rent they collect often can cover the mortgage payment, taxes and insurance — with additional cash left over, he said.
“Investors are looking at these properties on a monthly income generating basis,” said Alex Villacorta, director of research & analytics at Clear Capital, a firm that provides data for real-estate asset valuation and risk assessment to financial services companies. “They can start to realize instant profit margins, even as the market goes down more.”
“There’s a turning point where the cost of owning a home is less than the cost of renting,” he said. “When that disparity grows … we will see a push from investors to pick up investment properties.”
In general, that investors are beginning to snap up rental properties is a good thing for the stabilization of housing markets, King said. It’s also one of the ways that a floor on real-estate prices can be established; as more investors spot opportunities in residential markets, prices could bottom.
“Once investors come into a community, you’re seeing the beginning of the end of the decline,” King said.
What to look for
Before investing in a rental, make sure you’ve considered the harsh realities of becoming a landlord, said Mike Litzner, broker and owner of Century 21 American Homes, which has locations in Long Island, Queens, Nassau and Suffolk Counties. He’s also a landlord.
“There are some people who think it’s glamorous, but when you get the wrong tenants, it can be a nightmare,” he said. That said, when you get the right tenants and the properties perform as expected, it can be a “tremendous” way to make a buck — and he believes the “smart money” is now working its way into the marketplace.
Before considering any purchase, decide if you have it in you to be a landlord. You have to be willing to set expectations and consequences to ensure rents are paid on time, and you have to ready for the possibility of evicting non-paying tenants, he said. Plus, you’re responsible for the upkeep of the property, no matter how your tenants treat it.
From there, it’s a numbers game. Get a sense of what rents are in the area you’re considering, the vacancy rate, and consider your costs of financing, Villacorta said. Don’t forget the other costs of owning a property, including taxes and upkeep. Some investors may want to enlist the help of a real-estate agent to assist with analyzing the market.
Remember, often the best investment is a home you wouldn’t necessarily buy to live in yourself, Litzner said. These days, foreclosures can be snapped up at bargain prices, and as long as you have the means to make required repairs, they can represent good opportunities.
Don’t buy the most expensive house in the neighborhood,” King said, “and look at the broader community. Where are the renters going to come from, and what do they do?” Areas near colleges and military installations can be good places to invest; and think about what renters typically look for, including access to public transportation, he said.
Some of the houses bought in the worst conditions ended up being the best investments for Litzner, who was able to put some sweat equity into the homes before renting them out. It’s also important that investors have multiyear plans for the properties they buy, planning the financials at least 5 years into the future, he said.
Best markets
Many investors sink their money into properties not far from where they live. Those are likely the communities they’re most familiar with, and from a management perspective, you’re never far from the tenants you’re dealing with.
But some markets are better than others to invest in right now.
A recent report from Inman News, an online real-estate industry publication, named the 10 best markets for home investors. These are markets with traits including high affordability, low prices, high share of foreclosure sales, high population growth, improving unemployment rate, and high return on investment in the next 10 years.
The following are their top 10 markets:

Indianapolis-Carmel, Ind.
Winchester, Va.-W.Va.
Gainesville, Fla.
Tucson, Ariz.
Tallahassee, Fla.
Hagerstown-Martinsburg, Md.-W.Va.
Salt Lake City
Richmond, Va.
Gainesville, Ga.
Winston-Salem, N.C.

Source: Amy Hoak, Wall Street Journal

The New Trend of Homeowners in the Bay Area

Greg Wang — Sat, 04 Jun 2011 08:32:00 +0000

An interesting new buying trend I’m starting to see around the Bay area is a segment of homeowners are still trading up even in a declining market. While I find it rather unexpected, I believe the local conditions make such a move both feasible and favorable.
First, by trading up, these homeowners are opting to sell their homes at either a small or negligible loss so they can purchase a property in a prestigious neighborhood at a steep discount. These are usually million dollar neighborhoods with a few distressed homes that are being sold for 30-40% discounts, even steeper drops than more modest and affordable neighborhoods. Often, they are able to get such a home for little more than what they paid for their current home. Similarly, townhouse homeowners are able to trade up to single families with a bit of financing lifting and foresight.
While taking a loss is hard for anybody to stomach, I commend these homeowners for using this situation to get into a home that otherwise would have remained out of reach even in times of easy credit. The calculus is cold and brutal. For a loss of around $30-100K, they’re able to save $300-500K on a prime property when trading up. This is not for the faint of heart.

Meanwhile, another group of homeowners are trading up by actually going against the prevalent trend and moving out into the suburbs. Out there, they can easily buy a home twice as large for half the price. Plus, many of the homes are nearly brand new, having sat empty since the housing bust. This is possible as the telecommuting culture is pretty mature in the Bay Area and many technical workers don’t ever have to show up at the office, negating the enormous burden of high fuel costs and enormous amount of time spent in traffic each day.
Of course, the first strategy is predicated by a belief that home prices in California are not about to revert back to the national median. As for the second, it’s a great way to hedge against further price declines since prices in the suburbs are already at the national median.